Softwood-lumber victory unlikely to halt conflict between Canada and U.S.

Ottawa and the B.C. government declared victory in a softwood-lumber dispute with the United States, but industry observers say the conflict is far from over.

The London Court of International Arbitration on Wednesday dismissed in its entirety a U.S. complaint that British Columbia was subsidizing wood damaged by the mountain pine beetle. Details of the ruling, however, will remain confidential for 10 days. The panel's unanimous decision cannot be appealed.

International Trade Minister Ed Fast called the decision a welcomed victory for workers in B.C.'s lumber businesses.

Pat Bell, the province's Jobs Minister, echoed Mr. Fast in lauding the ruling as a triumph for the roughly 53,000 people who work in B.C.'s wood-products industry.

"The fact that this is behind us, it's clearly demonstrated that B.C. has been vindicated," he said.

In January 2011, the U.S. alleged British Columbia was selling softwood lumber at less than market value, which resulted in a subsidy to lumber producers worth more than $300-million. The practice, the U.S. claimed, was a circumvention of pricing policies under the 2006 Canada-U.S. Softwood Lumber Agreement and amounted to cheating.

The province argued it had to drop the price on low-grade timber that had been damaged by an unprecedented mountain-pine-beetle infestation.

Had the decision gone the other way, the amount of monetary damages awarded would have been collected through an extra border tax on lumber exports from B.C., which would have sent a ripple effect through the industry, said John Allan, president of the BC Lumber Trade Council.

The U.S. Lumber Coalition, a lumber lobby group, said in a statement that it "vehemently disagrees" with the decision, maintaining B.C.'s timber practices allow the province to give "back to lumber producers with one hand the export taxes it had collected with the other."

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The claims from the coalition have become a business strategy of sorts, Mr. Allan said.

"We're used to the coalition harassing us on a regular basis and I don't expect them to go away real soon," said Mr. Allan, noting the industry south of the border has made similar complaints since the early 1980s.

"It's a way of doing business they have, whereby if they can increase our costs and reduce our flow of lumber to the U.S., there's more market left for their producers. At the end of the day, this argument is all around market share and market economics, as opposed to trade law."

Bob Simpson, independent MLA for Cariboo North, believes such conflicts will continue until there are changes to how lumber producers get access to logs in B.C., where 94 per cent of the forest land base is owned by the province.

Mr. Bell, B.C. Jobs Minister, has insisted U.S. lumber producers would be better off if they continued to work with their Canadian counterparts to grow the market for wood across North America, instead of putting their resources into "costly, groundless litigation."

B.C. exported $3.83-billion worth of softwood lumber to all world markets in 2011, with roughly half going to the U.S. China is the province's second largest and fastest growing market.

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Canada's share of the American softwood lumber market has dropped to 25 per cent from 34 per cent in 2006, Mr. Allan said.

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